An overview of the main market situation trends in the construction sector and short-medium term investment prospects
QUARTERLY REPORT
Construction Industry
in collaboration with Prometeia
The reports provides a concise quarterly overview of the main market situation trends in the construction sector in Italy and short-medium term investment prospects with reference to the general macro-economic and sector specific scenarios (residential building – new and renovations alike – non-residential construction and civil engineering).
DECEMBER 2019
The expansion period for construction investments continued in 2020-2021, albeit at a slower pace
Construction industry report in brief - DECEMBER 2019
- Weak trend in the second half of 2019
After the downturn in the second quarter, construction sector investments posted only a modest recovery in the following three months. Short-term indicators highlight on-going weak dynamics in the construction sector even in the last quarter of the year. - Estimated growth for 2019 is substantially confirmed
Expansionary dynamics seem to involve just about all construction sectors, thanks not the least to the reversal of trends for civil engineering which, driven by signs of recovery in public investments, are expected to resume growth. - The next two-year forecast indicates moderate expansion
The slowdown will affect all business sectors, with the exception of civil engineering which, on the contrary, will see a profile of accelerated growth thanks to the huge resources made available in the period 2016-2019, as well as the funds allocated by the 2020 Budget Law to various central and regional administrations to implement public works.
→ Go to FULL REPORT updated to December 2019
SEPTEMBER 2019
Recovery in the construction sector by now extends into the public works sector
Construction industry report in brief - SEPTEMBER 2019
- Volatile trend in the first half-year
Investments in construction were characterised in the first half of 2019 by considerable variability and were also affected climatic conditions. Market information is conflicting but, in overall terms, tends to suggest more moderate evolution in the second half-year. - Initial signs of a reversal in the trend for public investments
Estimated growth in construction investment for 2019 (3.5%) is confirmed. This expansionary trend is likely to involve all sectors of activity, including civil engineering which - thanks to the resumption of public investments - will see an end to the long period of poor performance. - The recovery is expected to consolidate in 2020-2021
The main impulse behind growth is expected to come from civil engineering, on the assumption that recent legislation supporting the construction sector is fully implemented (“Sblocca Cantieri” and “Crescita” decrees).
→ Go to FULL REPORT updated to September 2019
JUNE 2019
The construction and building sector continues to recover, thanks also to input from public works
Construction industry report in brief - JUNE 2019
- Estimates for 2019 revised upwards
The very positive trend of the first quarter, despite expectations for a partial nega-tive rebound in the second, brought about a significant upwards review of forecasts for 2019. Growth in construction investments will probably be driven by residential projects, especially in new housing, and the resumption of civil engineering works. - The recovery in the construction sector will consolidate in 2020-2021
The main impulse behind growth is still expected to come from civil engineering works, on the assumption that the sector will benefit from the effects of measures to revive public investments introduced in the 2019 Budget Law and other recently launched dispositions, such as the so-called “Unblock Construction Sites” decree. In the same period, residential construction is also expected to continue expansion, albeit at a more moderate rate than in the two-year period 2018-2019. - This scenario nevertheless involves significant risks of a new downturn
An unexpected slowdown in the economy or deterioration in the public finance framework would have a negative impact on the construction sector, bringing about more moderate evolution than currently envisaged. Additional risks are associated with the lengthy implementation times for public works.
→ Go to FULL REPORT updated to June 2019
MARCH 2019
Construction downturn in 2019, possible recovery from 2020
Construction industry report in brief - MARCH 2019
- Investments in construction grow moderately
National Accounting data indicates that 2018 ended with growth of 2.7% (raw data) for total investments in construction, a better performance than posted in the previous year. The average annual figure, however, underlies a quarterly profile of progressive moderation in growth, to the point of posting a setback in the fourth quarter. - The trend on the property market remained positive
In the 2018, house sales increased by 6.6%, consolidating the expansion trend underway almost continuously since 2014. A positive trend also characterised the non-residential market, especially in the tertiary-commercial segment (5.1%). - Tenders for public works have recovered
In 2018, the resumption of tenders for public works continued after the slowdown in 2016 arising from the application of the new procurement code. The positive signs for tenders calls, however, struggled to materialize in a resumption of spending on capital investments, confirming the gap between the publication of calls for tender and effective launch of works on site. - The Italian economy has been affected by an overall slowdown
In 2019, buildings also suffered from the overall slowdown affecting the Italian economy. After accelerating in 2018, investments in the sector are estimated to slow down in 2019 to 0.7%. The effects of the climate of uncertainty seem to take shape in lower expected growth for the residential sector and non-residential building; moreover, there are no signs in the short term of a particular recovery for civil works. - The relaunch of public investments is the basis of a reversal in trends
The first signs of a reversal in trends for the latter segment are only expected to appear as of 2020, when the effects of measures to relaunch public investment introduced in the 2019 Budget Law will begin to materialize, alongside other measures to support building & construction.
→ Go to FULL REPORT updated to March 2019
DECEMBER 2018
Consolidation of the recovery in 2019-2020
Construction industry report in brief - DECEMBER 2018
- Positive signs also emerged in the third quarter of 2018
After the setback in the first three months of the year, construction investments resumed growth in the following two quarters. Economic indicators seem to confirm the continuation of the expansion phase. - Residential construction as the driving force in 2018
Estimates for 2018 have been revised upwards compared to September and indicate an expansion in investments close to 2% on average over the year. Residential construction is driving the field, thanks to continued growth in investments in redevelopment and the resumption of expansion dynamics for new homes. A positive trend also characterized non-residential construction, while difficulties remain for civil works, arising from the delays caused by the implementation of measures to support public investments. - Growth will extend into all sectors in 2019-2020
The growth in construction investments is expected to consolidate over the next two years (2.1% on average/year) driven by civil works, assuming a resumption in public investments that will especially be seen in 2020. In the same period, residential construction is also expected to continue expansion, albeit at a more moderate rate than in the two-year period 2017-2018. - In relation to this scenario, there are significant risks of a new downturn
Any intensification of tensions on the sovereign debt markets would have a negative impact on the construction sector in the wake of tighter credit conditions.
→ Go to FULL REPORT updated to December 2018
SEPTEMBER 2018
Prospects for gradual consolidation of the recovery 2019-2020
Construction industry report in brief - SEPTEMBER 2018
- Modest positive signs in the second quarter of 2018
After the setback in the first three months of the year, construction investments resumed growth at a moderate rate in the second quarter. The market situation indicators available for the second half year confirm the uneven trends characterising the current recovery. - The public works sector is still weak
Estimates for 2018 suggest expansion in investments of 1.5% on average per year. Residential housing is expected to continue driving the sector, thanks not the least to the positive resumption in building new homes, as well as the non-residential segment. On the other hand, the stalemate in the implementation of infrastructure projects continues, made rather worse when the new government launched cost-benefit analysis for the main public works. - Growth will extend into all sectors in 2019-2020
Growth in construction investments is expected to increase slightly over the next two years (1.7% on average per year), benefiting from a still-positive trend in residential and non-residential building alike, and above all a recovery in the civil engineering sector. This scenario assumes that there is an effective revival in public investments, starting from resources allocated in recent years but so far blocked by several factors, including the new Tender Procurement Code and difficulties in implementing spending programmes on the part of local authorities.
→ Go to FULL REPORT updated to September 2018
JUNE 2018
The construction cycle in Italy will maintain a moderate pace in 2018, that will be strengthened over the following two years
Construction industry report in brief - JUNE 2018
- Irregular trend in the first half of 2018
The recovery in construction investments came to a halt in the first three months of the year. The market situation-economic information available is conflicting and suggests only a modest strengthening in the second quarter. - A climate of uncertainty is affecting the public works sector
Estimates for 2018 suggest expansion in investments of just over 1% on average per year. Residential construction will once again be driven by housing renovations, joined by a recovery of a weak growth for new homes. Estimates for the civil engineering sector are rather prudent, given the persistent uncertainty surrounding the launch of infrastructure projects. The announcement by the new government of a project review into the main public works will have the effect of postponing effective implementation of currently planned infrastructures. - Gradual consolidation of the recovery in 2019-2020
The growth in construction investments is expected to strengthen over the next two years, benefiting from moderate expansion in residential construction and above all a more dynamic trend in civil works. This scenario assumes the effective re-allocation of public investments based on appropriations of resources enacted since 2016 but so far blocked by the new procurement regulations and delays in the implementation of local government spending programmes.
→ Go to FULL REPORT updated to June 2018
MARCH 2017
The world earth moving machinery market grew by 6.9% in 2016
Construction industry report in brief - MARCH 2017
- Significant acceleration of sales in the last quarter of 2016
After an uphill start, 2016 closed with a significant acceleration in global demand for earth-moving machinery: (+38.3% between October and December compared to the same period in 2015) whereby 670,000 machines were sold by the end of the year. - World market
The main input in reversing this trend on the world construction equipment market in the last quarter of 2016 primarily came from North America and, secondly, from China.
Leaving success in China aside, emerging markets also highlighted an excellent performance on the Indian market. On the other hand, Latin America experienced significant difficulties, largely in the wake of the economic downturns seen in Brazil and Venezuela.
The Western European market closed 2016 with sales up by 12%. This performance is in line with the dynamics seen throughout the year and was seen mainly in France, Germany and, to a lesser extent, Italy. The United Kingdom turned in a poor performance (-5.3% average for 2016).
Sales of construction equipment in Central-Eastern Europe as a whole increased by 3.7% in 2016. This positive result at last interrupted a period of considerable difficulties, although there are still some problems. Sales slowed down in the last quarter on most markets. Despite the slowdown at the end of the year, Turkey posted a new high, with over 11,000 machines sold. Mention must also be made of the progressive improvement of Russia during the year, closing at +35% over 2015. - Italian market
Demand for earth moving machinery on the Italian market posted strong and constant growth throughout 2016. The result was sales of more than 10,000 machines; this success consolidated the positive trend that began in 2014. There are still some shadows as regards the future when looking at the building industry scenario.
Market and economic signals suggest consolidation of the recovery over the two-year period 2017-2018, albeit at a moderate rate.
→ Go to FULL REPORT updated to March 2017
DECEMBER 2016
Slow recovery path in 2016 while investments will improve in the two-year period 2017-2018
Construction industry report in brief - DECEMBER 2016
- 2016: a year of slow recovery
The way to recovery for building in Italy is proving to be slower and more uneven than expected.
2016 is expected to close with a more moderate growth in investments compared to estimates in recent months (1% on average for the year). The most significant downward review involves the civil engineering sector, largely attributable to the uncertainty caused by the new code for public contracts.
The non-residential sector closed 2016 with a slight increase over the previous year, while residential construction confirmed good expansion driven by investments in renovation that managed to offset the further weakening as regards construction of new homes. - Improvements are expected to continue (2017-2018)
The construction sector scenario in Italy envisages continued recovery in investments in the period 2017-2018. The main driving forces will be non-residential buildings and civil engineering works (major infrastructure projects as well as also medium-sized projects – especially school buildings and land safety).
Another important contribution will come from the extension of tax benefits for renovations and the eco-bonus for energy upgrading of buildings (extended to included condominiums), as well as the allocation of resources for the reconstruction of areas hit by recent earthquakes.
Building renovation will remain positive, whereas new residential projects will only emerge from the recession in 2018, since this field is still hampered by the need to sell very high levels of unsold housing.
→ Go to FULL REPORT updated to December 2016
SEPTEMBER 2016
The recovery is still slow and uneven but consolidation expected as of 2017
Construction industry report in brief - SEPTEMBER 2016
- Uncertain trends for 2016
Signs that the Italian construction sector is emerging from the long recession have weakened: investments in the sector witnessed a substantial setback in the first half of 2016 and, in the light of market situation information, a moderate performance may be expected for the second half of the year.
Negative signs include public tenders, currently "blocked" following the ratification of the new tender procurement code, while the expansion trend in the property market has consolidated and even spread to all market segments (residential and non-residential alike). - Growth for 2016 reviewed downwards
Estimates for the end of this year envisage lower growth in investments in buildings than originally expected; the most significant downward review concerns the civil engineering sector, where the expected impact of measures implemented by the Government to re-launch infrastructure investments is likely to be less evident. The residential sector continues to benefit from fiscal incentives implemented for renovation investments, offsetting the further setback as regards new homes. - Improvements are likely
2017-2018 should see a progressive strengthening of the recovery, driven by non-residential buildings and, especially, public works. The measures announced for the next stability law/budget encourage hopes for greater impetus as regards public investments as part of fiscal policy.
The growth estimated for residential building is more moderate; the renovation sector will maintain a favourable trend, while investments in new homes and the end of recession will continue to be stalled by high stocks of unsold property.
→ Go to FULL REPORT updated to September 2016
JUNE 2016
There are still difficulties as regards emerging from the long-term building crisis but there are signs that the recovery is gradually strengthening
Construction industry report in brief - JUNE 2016
- The Italian economy confirms growth
The Italian economy confirmed growth in the first quarter of 2016 thanks to increased domestic demand and is expected to continue – albeit at more moderate rates given difficulties for exports to non-EU markets. - The construction sector recovery is still fragile and uneven
Investments in restructuring and redevelopment programmes are helping to drive the recovery in the construction field and offset the continuing weakness in the new housing sector. The gradual recovery in the sector, albeit still fragile and uneven, shows cautious signs of improvement even as regards non-residential buildings. The real estate market has seen an acceleration in sales, while public works have experienced some weakness that might continue for several months, largely because of uncertainties over the new procurement tender code. - Public investments confirm their role as a driving force
The leading role of public investments through fiscal policy implementing significant measures for relaunching civil works is confirmed. Starting in 2016, the non-residential building market will resume positive trends thanks to a new cycle of business investments. - The residential sector will see a moderate recovery
The expansion profile for residential building is more moderate because, despite improvements to family finances and more favourable credit conditions, the need to sell existing unsold housing stock will slow down this sphere.
→ Go to FULL REPORT updated to June 2016
MARCH 2016
First signs of an upturn towards recovery
Construction industry report in brief - MARCH 2016
- The long period of adjustment seems to be over
Since mid-2015, construction investments have begun a gradual recovery, albeit from levels significantly down-sized levels compared to pre-crisis highs. The recovery is not yet widespread across all business sectors: there are still signs of further weakening for new housing while investments in redevelopment are holding up. Other aspects include a significant halt to the fall in public works, driven by the resumption of tender announcements for public works already seen in 2014. - Signals are still favourable in early 2016
Currently available economic data tends to confirm (net of seasonal factors) the resumption of the construction cycle. Signs of recovery continue to appear in the housing market, with a further increase of residential transactions, while prices also seem to be stabilising. - Resumption guided by public works, even in the foreseeable future
The recovery of investments in construction fields is expected to be consolidated during the 2016 thanks to expansion in the non-residential sector and, above all, public works. The measures implemented by the Government – including exceeding the internal stability pact and European investment clause – should create favourable conditions for a revival in public infrastructures. A more moderate recovery is estimated for residential construction, since the new housing sector is still affected by the gradual resorption of unsold property.
→ Go to FULL REPORT updated to March 2016
DECEMBER 2015
The construction sector is emerging very slowly from the recession against a context of a gradual recovery in economic activity
Construction industry report in brief - DECEMBER 2015
- Construction industry revival as of 2016
The adjustment of investments in the construction sector is expected to bottom out towards the end of 2015, giving way to a recovery starting as of the following year.
The main driving forces will be public works and, in part, investments in private non-residential building. - Public works will be the driving force, with a more moderate recovery for residential building
The prospect of a slow (and limited) housing recovery will continue to involves the renovation market than investments in building new homes.
→ Go to FULL REPORT updated to December 2015
SEPTEMBER 2015
The end of the construction crisis continues to be slow and full of pitfalls. The onset of recovery postponed to 2016
Construction industry report in brief - SEPTEMBER 2015
- Contrasting signals from economic indicators
The current situation on the Italian construction market is characterised by highs and lows, confirming the difficulties involved in emerging from a recession going back for more than eight years. Investment and production data indicated that the correction phase is still underway, with more favourable indications from the climate of confidence and employment trends. In the real estate market, slow transactions in early 2015 were attributed to temporary factors, while the downward trend for prices continues. - The fall in investments also began to bottom out in 2015
Estimates for this year indicate a downturn in construction investments close to 2%, which is better than in previous years. The residential sector continues to suffer from the halt in new housing, which is still significantly affected by the slow reabsorption of unsold property; there is some support, however, in the shape of recovery and redevelopment projects. In line with the resumption of public tenders that began by 2014, a lower rate of contraction in public works is now expected. - Gradual recovery as of 2016 driven by public investments
The scenario drawn up by Prometeia envisages a moderate growth profile in the construction sector starting in 2016. The resumption will be driven by the new expansion cycle in non-residential investments and, above all, the resumption of public investments encouraged by Government measures to boost infrastructures.
→ Go to FULL REPORT updated to September 2015